How proposed state fee could impact Phillips 66’s rail-spur plans

As the fate of a controversial proposal by Phillips 66 to ship crude oil by train to its Nipomo refinery faces a looming Aug. 15 deadline, a proposed state fee on train cars carrying certain hazardous materials — including crude oil — further complicates the project.

Phillips 66 has historically pumped crude oil, via pipeline, into its refinery on the Nipomo Mesa.

If the oil-by-rail proposal is approved, the state fee could cost the oil company $3,600 for each 80-car train, or more than $560,000 per year, according to Tribune calculations.

The Phillips 66 project calls for building a 1.3-mile rail spur to an existing Union Pacific Corp. line, so it can bring in three trains per week, each with 80 rail cars carrying a total of 2.2 million gallons of crude oil to be refined and then pumped via pipeline about 200 miles north as part of its San Francisco Refinery system.

The project has faced stiff opposition from residents and elected officials in communities near the rail line throughout California. Many say they fear a disastrous derailment, such as the one that occurred in Oregon last month.

During five days of public hearings by the San Luis Obispo County Planning Commission earlier this year, hundreds of speakers implored the panel not to approve the project. An equal number of company employees and supporters urged the commission to vote for the rail-spur project. The issue will continue to Sept. 22 while additional information is gathered and analyzed.

The project may have hit a snag, though.

The company has until Aug. 15 to give the San Luis Obispo County Department of Planning and Building additional information about the project and pay more than $240,000 in fees, or the project application will be withdrawn.

The company has not responded to The Tribune’s questions about whether it plans to meet that deadline, saying only that it “remain(s) confident about the project.”

Meanwhile, the state Office of Emergency Services has drawn up a list of its 25 most hazardous substances shipped by rail in California, and identified 12 regions where what it calls “significant gaps” exist in local emergency response agencies’ ability to deal with a spill of those hazardous materials.

In its latest analysis in March 2015, the agency found that the region that includes Monterey, San Luis Obispo and northern Santa Barbara counties was one of those gap areas, due to it having a Type 3 Hazardous Materials Response Team in a designated high-hazard area.

In January, the region’s Hazardous Materials Response Team was upgraded to a Type 2 designation, after a series of state inspections of the area’s emergency response equipment and training exercises. Cal Fire Battalion Chief Paul Lee, who leads the team, says the new classification will remove the region from future lists of gap response areas.

The $45 fee for every train car carrying hazardous substances would be used to pay for the creation of specially trained hazmat teams in 12 gap areas, which include the lower Central Valley. Under the plan, the owner of the materials must pay the fee, which would be collected by the railroad companies and paid to the state. San Luis Obispo County was considered a gap area before its Hazardous Materials Response Team was upgraded recently.

On Thursday, Phillips 66 spokesman Dennis Nuss declined to comment on whether the company has any position on the proposed fee.

Asked how the fee could affect the rail-spur project, or whether the project would remain viable with the added price tag, Nuss would not comment.

“There’s a lot of speculation in your questions, and we don’t typically comment on that,” Nuss wrote in an email.

This story was originally published July 30, 2016 at 8:03 PM with the headline "How proposed state fee could impact Phillips 66’s rail-spur plans."